david ricardo (1772-1823) - downeyeconomics.weebly.com · what are a company’s inputs? •capital...
TRANSCRIPT
David Ricardo (1772-1823)
• British: Classical
• Successful business/financier
• Theories:
– Comparative Advantage
– Anti-protectionism
– Book: Principles of Political Economy and Taxation
• Value Theory
1
Purpose of efficiency
• To improve….
–QUALITY
• To keep prices….
– LOW
• To eliminate…
–WASTE
What are a company’s inputs?
• Capital invested in the business.
• Expenses
• Costs
• Specifics: – Labor, utilities, equipment, building, insurance,
marketing/advertising, rent, legal fees, taxes.
What is the term for what a business produces?
• OUTPUT
Total cost =
• Sum of all factors of production when making goods.
AVERAGE COST
• Sum of all factors of production when making one unit of a good.
Businesses may become MORE efficient in two basic ways
[INPUT/OUTPUT]:
• KEEP OUTPUT STEADY AND….
–REDUCE INPUTS
• KEEP INPUT STEADY AND…
–INCREASE OUTPUT
SPECIALIZATION
• --What is the term for concentrating on the product or service that a business/individual does best?
GEOGRAPHIC SPECIALIZATION
• When a certain region has an advantage is production.
OVERSPECIALIZATION
• When a business goes to the extreme in specializing, which actually makes it less efficient.
Elements of mass production
• DIVISION OF LABOR
• STANDARDIZED PARTS
• ASSEMBLY LINE
PROTECTIONISM
• The theory that domestic manufactures need government protection against foreign competition.
FREE TRADE
• Result of no restrictions or penalties upon the trading of goods.
What are the typical expenses for a business?
• Labor -- wages and health insurance
• Property –
• Utilities
• Equipment
• Insurance
• Taxes, fees
• Cost of goods sold --